ANOTHER time-hallowed institution has fallen in the great financial meltdown. Switzerland, with $2 trillion of foreign money in its banks, has decided to relax its famous banking secrecy rules. It would have never happened without the crisis: UBS, Switzerland’s largest bank, would have withstood pressure from Washington to reveal details about 52,000 American clients which the US tax authorities say is costing them billions of dollars in lost revenue every year. The crisis changed the game plan. Last month, it announced a $16.6 billion loss for 2008, the biggest in Swiss corporate history. It is in serious trouble. If the Americans were to carry out their threat and revoke its license, it could destroy it and, with it, the reputation of the Swiss banking industry — itself the major pillar of the Swiss economy.
But this is not just American doing — and it is not just Switzerland that has agreed to change its rules. Austria and Luxembourg have as well. Officially the pressure for change has come from the Organization for Economic Cooperation and Development, which threatened to put all three on its blacklist of uncooperative tax havens. Last week, another tax haven, the Channel Island of Jersey agreed to share information about offshore tax accounts with the British government.
The timing is significant. Rifts between the Americans and the Europeans on how to tackle the financial crisis may have been apparent in the meeting of G-20 finance ministers yesterday in the UK but on tax havens there is no disagreement. The UK, Germany and France are as determined as the US to end them; the G-20 summit next month in London is expected to result in specific sanctions. As to the strength of German feelings on the matter, they were in stark evidence last year when it paid spies to acquire details on tax cheats in Liechtenstein.
European action would be devastating to the Swiss. The last thing they want is massive border tailbacks as French and German customs officials search vehicle by vehicle for smuggled cash heading to bank accounts in Geneva and Zurich. They knew the writing was on the wall when a fortnight ago French President Nicolas Sarkozy announced the inevitability of sanctions against them. It was as potent as any American threat.
Many will cheer the Swiss climb-down. Memories of Nazi gold and stashes of dictators’ loot still darken Switzerland’s reputation even though the secrecy surrounding bank deposits in the country began to erode years ago. Why, people may ask, should it have laws that enable people to cheat their own countries of legitimate tax revenue? How much its offer is worth, however, is another matter. It says information will be provided on a case-by-case basis. That is fine if the US requests details on a Mr. Smith’s accounts, but what happens if the accounts are in another name or just numbered accounts? It would be the end of any investigation. One last point. The UK is responsible for more tax havens than any other country: The Caymans, the Channel Islands, the Isle of Man, and Gibraltar. For 10 years, Prime Minister Gordon Brown was finance minister; he did nothing to change the rules. Now there is a crisis, it is different. Does that mean it is fine to cheat in good times but not in bad?
Climate change: Hope remains
THE Independent (UK) yesterday commented on climate change, saying in part:
We have become used to stark warnings from scientists of what lies in store if we fail to curb our carbon emissions. But, even so, the statement that emerged from the international scientific conference on global warming this week in Copenhagen was sobering in its bluntness. The summit, attended by some 2,000 leading scientists, stated: “The climate system is already moving beyond the patterns of natural variability within which our society and economy have developed and thrived. Rapid, sustained and effective mitigation based on global and regional actions is required to avoid dangerous climate change.”
The urgency of the warning and the demand for political action are inspired by the most recent data on the progress of global warming. Research papers were presented to the conference which showed a range of potentially catastrophic consequences if we adopt a “business as usual” approach. The melting of Arctic sea ice could cause global sea levels to rise by more than a meter by the end of the century. The disappearance of the Amazon rainforest is a possibility if the world warms by 3C over the next 100 years. Under such conditions, billions of people, particularly in the poorer parts of the world, would be forced to move across existing national borders in order to survive. And just as the world needs global cooperation to fend off a prolonged economic slump, we need international partnership to meet the threat of climate change. Every nation is suffering because of the economic crisis. They stand equally exposed to the threat of runaway climate change. So curbing emission has to be part of a global partnership. That is why December’s international meeting in Copenhagen to agree on a successor to the Kyoto Protocol is of such critical importance.
